Question

Suppose that the demand curve for pizzas (in thousands per day) is given by P =...

Suppose that the demand curve for pizzas (in thousands per day) is given by P = 12 – 0.5Q. Calculate the price elasticity of demand if the price is equal to $6. Give and explain one factor that could cause the elasticity of demand for pizzas to increase.

Your answer will be marked according to the following categories.

  • Present correct equation
  • Present correct calculation
  • State a correct factor
  • Detailed Explanation (Justify Answer)
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

P = 12 – 0.5Q
0.5Q = 12 - P
Q = 24 - 2P

Taking derivate of Q wrt P:
dQ/dP = - 2

At P = 6, Q = 24 - 2*6
Q = 12

Elasticity of Demand = (dQ/dP)*(P/ Q)

= (-2)*(6/12)

= -1

One factor that could increase the price elasticity of demand for pizzas:

- Availability of Close substitutes: If a good has more substitutes, then its elasticity will be higher. A small increase in the price of Pizzas would ask the customer to shift their consumption to other substitutes like burgers, hot dog etc. Consumers here are price sensitive and change their preferences towards the good quickly.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose the demand curve for a product is given by the equation Qd = 30/P. Compute...
Suppose the demand curve for a product is given by the equation Qd = 30/P. Compute the quantities demanded at prices of $1, 2, 3, 4, 5, and 6. Graph the demand curve. Use the arc method to calculate the price elasticity of demand between $1 and $2, and between $5 and $6. How does this demand curve compare to the linear demand curve?
Isabella is a student and also works part-time as a waitress earning $10 per hour. Isabella...
Isabella is a student and also works part-time as a waitress earning $10 per hour. Isabella was invited to attend a play on Sunday afternoon. Attending the play will take 2 hours, and a ticket costs $60. If Isabella were to spend the time studying for an exam, she will receive an HD instead of a D. She values a HD over a D at $40. What is Isabella’s opportunity cost (OC) of attending the play? Explain your answer. Your...
Isabella is a student and also works part-time as a waitress earning $10 per hour. Isabella...
Isabella is a student and also works part-time as a waitress earning $10 per hour. Isabella was invited to attend a play on Sunday afternoon. Attending the play will take 2 hours, and a ticket costs $60. If Isabella were to spend the time studying for an exam, she will receive an HD instead of a D. She values a HD over a D at $40. What is Isabella’s opportunity cost (OC) of attending the play? Explain your answer. Your...
A monopoly firm faces a demand curve given by the following equation: P = $500 -...
A monopoly firm faces a demand curve given by the following equation: P = $500 - 10Q, where Q equals quantity sold per day. It's marginal cost curve is MC = $100 per day. Assume that the firm faces no fixed cost. Provide an explanation of the results. How much will the firm produce? How much will it charge? Can you determine its profit per day? Suppose a tax of $1000 per day is imposed on the firm? How will...
31. Increases in demand are graphed as rightward shifts of the demand curve. Similarly, increases in...
31. Increases in demand are graphed as rightward shifts of the demand curve. Similarly, increases in supply are graphed as rightward shifts of the supply curve. Group of answer choices True False 32. Assume the income elasticity of a car is 0.75. If consumer income decreases by 5%, the quantity demanded would _______ by _______. Group of answer choices increase 5.75% increase, 3.75% increase, 4.25% increase, 1.33% decrease, 3.75% 33. Which of the following will result in a definite increase...
A monopoly firm faces a demand curve given by the following equation - P = $500...
A monopoly firm faces a demand curve given by the following equation - P = $500 - 10Q, where Q equals quantity per day. Its marginal cost curve is MC = $100 per day. Assume that the firm faces no fixed cost. Please answer each question mathematically. a). Now suppose a tax of $100 per unit is imposed. How will this affect the firms price? b). How would a $100 per unit tax affect the firms profit maximizing output per...
The demand function for local bus service (measured in rides per day) is given by r...
The demand function for local bus service (measured in rides per day) is given by r = 5000-1000pr and the current price per ride is $1. The bus company has applied to the local public service commission for a rate increase. A citizens’ committee disagree and assert that the price should be lowered to attract more rides and thus increase revenues. Ascertain which side is correct and why? b. Show that at the maximum of the average product (AP) of...
A monopoly firm faces a demand curve given by the following equation: P = $500 −...
A monopoly firm faces a demand curve given by the following equation: P = $500 − 10Q, where Q equals quantity sold per day. Its marginal cost curve is MC = $100 per day. Assume that the firm faces no fixed cost. You may wish to arrive at the answers mathematically, or by using a graph (the graph is not required to be presented), either way, please provide a brief description of how you arrived at your results. Excel please!!!...
Assume that the demand curve D(p) given below is the market demand for apples: Q=D(p)=320−12pQ=D(p)=320-12p, p...
Assume that the demand curve D(p) given below is the market demand for apples: Q=D(p)=320−12pQ=D(p)=320-12p, p > 0 Let the market supply of apples be given by: Q=S(p)=60+15pQ=S(p)=60+15p, p > 0 where p is the price (in dollars) and Q is the quantity. The functions D(p) and S(p) give the number of bushels demanded and supplied. What is the consumer surplus at the equilibrium price and quantity? Round the equilibrium price to the nearest cent, use that rounded price to...
1. Suppose the market demand for Paradise Bakery's cookies is given by the equation P=45-(1/2)Q. What...
1. Suppose the market demand for Paradise Bakery's cookies is given by the equation P=45-(1/2)Q. What quantity sold would maximize the revenue from the cookies? 1-) 40 2- )45 3-) 50 4-) 55 5-) None of these are correct. 2. A monopolist enjoys a monopoly over the right to sell automobiles on a certain island. It imports automobiles from abroad at a cost of $10,000 each and sells them at the price that maximizes profits. One day, the island’s government...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT